Strategic management Ch 13 Corporate Innovation & Entreprenuership

8/3/2019 Strategic management Ch 13 Corporate Innovation & Entreprenuership

1/32

11

Strategic EntrepreneurshipStrategic EntrepreneurshipHitt - Chapter 13Hitt - Chapter 13

MGNT428 Spring 2006MGNT428 Spring 2006

Dr. Gar Wiggs, InstructorDr. Gar Wiggs, Instructor


2/32

22

Knowledge ObjectivesKnowledge Objectives

After this session, you should have anunderstanding of the strategic management

knowledge needed to:

Define and explain strategic entrepreneurship.

Describe the importance of entrepreneurial opportunities,

innovation, and entrepreneurial capabilities.

Discuss the importance of international entrepreneurship.

Describe autonomous and induced strategic behaviorthetwo forms of internal corporate venturing.


3/32

33

This class session should provide you with thestrategic management knowledge needed to:

Knowledge Objectives (contd)Knowledge Objectives (contd)

Discuss how cooperative strategies such as strategic

alliances are used to develop innovation.

Explain how firms use acquisitions to increase

their innovations and enrich their innovative

capabilities.

Describe the importance of venture capital andinitial public offerings to entrepreneurial activity.

Explain how strategic entrepreneurship creates

value in all types of firms.


4/32

44

Figure 1.1Figure 1.1

Copyright 2004 South-Western. All rights reserved.

The StrategicThe Strategic

ManagementManagement

ProcessProcess


5/32

55

Strategic EntrepreneurshipStrategic Entrepreneurship

Strategic Entrepreneurship Taking entrepreneurial actions using a

strategic perspective

Engaging in simultaneous opportunity seekingand competitive advantage seeking behaviors

Designing and implementing entrepreneurialstrategies to create wealth

Strategic entrepreneurship actions can betaken by: Individuals

Corporations


6/32

66

Strategic Entrepreneurship andStrategic Entrepreneurship and

InnovationInnovation

Entrepreneurship is concerned with:

The discovery of profitable opportunities

The exploitation of profitable opportunities

Firms that encourage entrepreneurship

are:

Risk takers

Committed to innovation

Proactive in creating opportunities rather than

waiting to respond to opportunities created by

others


7/32

77

Entrepreneurial OpportunitiesEntrepreneurial Opportunities

Entrepreneurial Opportunities

Conditions in which new products or services

can satisfy a need in the market

Entrepreneurs or entrepreneurial

managers must be able to:

Identify opportunities not perceived by others

Take actions to exploit the opportunities

Establish a competitive advantage


8/32

88

Innovation ProcessInnovation Process

The act of creating orThe act of creating ordeveloping a new product ordeveloping a new product orprocessprocess

Brings something new intoBrings something new intobeingbeing

Technical criteria are used toTechnical criteria are used todetermine the success of andetermine the success of an

inventioninvention

InventionInvention


9/32

99


The process of creating aThe process of creating a

commercial product from ancommercial product from an

inventioninvention

Brings something new intoBrings something new into

use.use.

Commercial criteria are usedCommercial criteria are used

to determine the success ofto determine the success ofan innovationan innovation

InventionInvention



10/32

1010


The adoption of an innovationThe adoption of an innovation

by similar firmsby similar firms

Usually leads to product orUsually leads to product or

process standardizationprocess standardization

Products based on imitationProducts based on imitationoften are offered at loweroften are offered at lower

prices but with fewer featuresprices but with fewer features

InventionInvention


ImitationImitation


11/32

1111

The Importance of InnovationThe Importance of Innovation

Innovation

Is a key outcome firms seek through

entrepreneurship

Is often the source of competitive success

Corporate Entrepreneurship

Innovations produced in large established

firms


12/32

1212

EntrepreneursEntrepreneurs

Entrepreneurs

Individuals acting independently or as part of

an organization who create a new venture or

develop an innovation, take risks enteringinnovations into the marketplace

Can be any manager or employee in an

organization


13/32

1313

Entrepreneurial CapabilitiesEntrepreneurial Capabilities

Entrepreneurial capabilities include:

Intellectual capital

Entrepreneurial mind-set

Transfer of entrepreneurial competence to

others in the organization

Effective human capital


14/32

1414

International EntrepreneurshipInternational Entrepreneurship

Entrepreneurship can:

Fuel economic growth

Create employment

Generate prosperity for

citizens

There is a strong positive

relationship between therate of entrepreneurial

activity and economic

development in a nation


15/32

1515

International EntrepreneurshipInternational Entrepreneurship

There must be a balance

(in the culture) between

individual initiative and

the spirit of cooperation and

group ownership of innovation

Successful entrepreneurial firms

Provide appropriate autonomy

Offer incentives for individual initiative

Promote cooperation and group

ownership of an innovation


16/32

1616

Incremental and Radical InnovationIncremental and Radical Innovation

Incremental Innovation

Most innovations are

incremental

Provides smallincrements in current

product lines

Improves existingknowledge and

processes

Can create value

Radical Innovation

Are rare because of

difficulty and risk

Provides significanttechnological

breakthroughs

Creates newknowledge and

processes

Can create value


17/32

1717

Internal Corporate Venturing: A ModelInternal Corporate Venturing: A Model

SOURCE: Adapted from R. A. Burgelman, 1983, A model of the

interactions of strategic behavior, corporate context, and the concept of

strategy, Academy of Management Review, 8: 65.


18/32

1818

Internal Corporate VenturingInternal Corporate Venturing

The set of activities used to create inventions

and innovations through internal means

R&D spending is linked to success in internal

corporate venturing Product champion

Organizational member with an

entrepreneurial vision of a new good orservice who seeks to create support for the

visions commercialization


19/32

1919

Internal Corporate VenturingInternal Corporate Venturing

A bottom-up process in which product

champions:

Pursue new ideas, often through a political process

Develop and coordinate the commercialization of anew good or service until it achieves success in the

marketplace

Forms of internal corporate venturing

Autonomous strategic behavior

Induced strategic behavior


20/32

2020

Venturing: Strategic BehaviorsVenturing: Strategic Behaviors

Autonomous Strategic Behavior

Based on a firms knowledge and resources

that are the sources of the firms innovation

A firms technological capabilities and

competencies are its basis for new products

and processes


21/32

2121

Venturing: Strategic BehaviorsVenturing: Strategic Behaviors

Induced Strategic Behavior

A top-down process whereby the firms

current strategy and structure foster product

innovations The strategy in place is filtered through a

matching structural hierarchy

Innovations are associated closely with thatstrategy and structure


22/32

2222

Implementing New ProductImplementing New Product

Development and Internal VenturesDevelopment and Internal Ventures

To be innovative and develop internal ventures

requires:

An entrepreneurial mindset Risk propensity

An emphasis on execution

Individuals with an entrepreneurial mindset

Engage the energies of everyone in their domain both

inside and outside the organization


23/32

2323

CrossFunctional Product DevelopmentCrossFunctional Product Development

TeamsTeams

Facilitate integration ofFacilitate integration ofactivities associated withactivities associated withdifferent organizationaldifferent organizationalfunctionsfunctions

Design, manufacturing,Design, manufacturing,marketing, etc.marketing, etc.

New product developmentNew product developmentprocesses can be completedprocesses can be completedmore quicklymore quickly

Products can be moreProducts can be moreeasily commercializedeasily commercializedwhen cross-functionalwhen cross-functionalteams work effectivelyteams work effectively

Cross-functionalCross-functional

Product DevelopmentProduct DevelopmentTeamTeam


24/32

2424

CrossFunctional Product DevelopmentCrossFunctional Product Development

TeamsTeams

Product developmentProduct development

stages are groupedstages are grouped

into parallel orinto parallel or

overlapping processes,overlapping processes,allowing the firm toallowing the firm to

tailor its producttailor its product

development effortsdevelopment efforts

Unique coreUnique core

competenciescompetencies

Needs of the marketNeeds of the market

Cross-functionalCross-functional

Product DevelopmentProduct DevelopmentTeamTeam


25/32

2525

Barriers to Cross-Functional TeamsBarriers to Cross-Functional Teams

EffectivenessEffectiveness

Different orientations and perceptions

Individuals from separate functions have different

orientations on issues

Perceive product development activities in different

ways

Organizational politics

Aggressive competition for resources among differentorganizational functions

Must achieve cross-functional integration with minimal

political conflict


26/32

2626

Facilitating Integration and InnovationFacilitating Integration and Innovation

Shared values Framed around the firms strategic intent and mission

Become the glue that promotes integration between

functional units

Effective leadership Sets goals and allocates resources

Goals include integrated development and

commercialization of new goods and services

Effective communication


27/32

2727

Creating Value from InnovationCreating Value from Innovation


28/32

2828

Cooperative Strategies forCooperative Strategies for

Entrepreneurship and InnovationEntrepreneurship and Innovation

Cooperation and integration of knowledge andresources is required to successfullycommercialize inventions

Entrepreneurial firms need investment capital anddistribution capabilities

Established companies need the technologicalknowledge possessed by entrepreneurial firms

Firms innovate through the sharing theirknowledge and skills in a cooperativerelationship


29/32

2929

Acquisitions to Buy InnovationAcquisitions to Buy Innovation

Acquisitions Rapidly extend the product line

Increase the firms revenues

Key risks of acquisitions The firm may substitute the ability to buy innovations

for an ability to produce innovations internally

The firm may lose intensity in R&D efforts

The firm may lose its ability to produce patents


30/32

3030

Capital for Entrepreneurial VenturesCapital for Entrepreneurial Ventures

Venture capital firms Seek high returns on their investment

Value the competence of the entrepreneur or the

human capital in the firm Place weight on the expected scope of competitive

rivalry the firm is likely to experience

Evaluate the degree of instability in the market

addressed


31/32

3131

Capital for Entrepreneurial VenturesCapital for Entrepreneurial Ventures

Initial public offerings (IPOs)

Are new stock priced to reflect the firms high potential

Often yield much larger equity investments than can be

obtained from venture capitalists

Investment bankers frequently play major roles in the

development and offering of IPOs

Firms that have previously received venture capitalbacking usually receive greater returns from IPOs


32/32

3232

Creating Value through StrategicCreating Value through Strategic

EntrepreneurshipEntrepreneurship Be effective in identifying opportunities

Be flexible and willing to take risks

Have sufficient resources and capabilities to exploitidentified opportunities

Sustain a competitive advantage while identifying and

exploiting opportunities

Develop an entrepreneurial mind-set among managers

and employees

Seek to enter and compete in international markets

Strategic management Ch 13 Corporate Innovation & Entreprenuership

Documents